Edtech meltdown: How BYJU'S, upGrad, others are struggling in 2023
Edtech major upGrad has fired 30% of the workforce at its subsidiary 'Campus.' This marks the second time an upGrad-owned company has laid off employees this year. upGrad is not the only edtech company to axe employees this year. The list includes BYJU's and DUX Education, among others. Let's take a look at what's contributing to the struggles of Indian edtech companies in 2023.
Funding winter began in 2022 and is still going on
One of the major factors behind the edtech meltdown in 2023 is the slowdown in funding. The funding winter that began in mid-2022 is still going on. Last year, edtech companies raised $3.1 billion from 182 rounds, much lower than the $5.4 billion raised in 2021 from 331 rounds. The VC funding crisis has affected late-stage start-ups more than others.
Late-stage funding fell by 48% in 2022
The shortage in funding is pointed out as a chief cause behind upGrad Campus' job cuts. The company, formerly known as Impartus, was acquired by upGrad in 2021. It has been operating independently since the acquisition. With funding drying up, edtech start-ups have resorted to layoffs to enter the path of profitability. Late-stage funding declined by 48.15% in 2022.
DUX Education is shutting down due to funding crunch
Campus isn't the only subsidiary of upGrad that laid off employees in 2023. Harappa, another upGrad subsidiary, fired about 60 employees in January. Unfortunately, funding issues do not just lead to layoffs. DUX Education, a K-12 edtech company, has decided to shut down its operations in April 2023. The company attributed its decision to difficulty in raising funds.
Edtech companies are dealing with increasing losses
Indian edtech platforms are also facing the problem of insurmountable losses. BYJU'S, the world's biggest edtech platform, is a chief example of this. Per the company's FY21 results, its losses jumped 19.8 times to Rs. 4,588 core, the most for an Indian start-up that year. This resulted in the edtech giant axing around 5% of its workforce, or 2,500 employees, last year.
BYJU'S is mulling shutting down loss-making WhiteHat Jr
BYJU'S promised at the time there won't be any layoffs. However, the company went ahead and cut 1,000 more jobs this year as part of a new cost-cutting initiative. Cost-cutting is the mantra for edtechs in India and they are holding to it very closely. BYJU'S is also mulling shutting down WhiteHat Jr, its $300 million acquisition, owing to increasing losses.
Edtech start-ups were on a hiring spree during the pandemic
upGrad is not different when it comes to losses. It is true that the company scaled two-fold in FY22, but its losses jumped three times from Rs. 211 crore in FY21 to Rs. 627 crore in FY22. Efficiency is another factor behind edtech layoffs. Like other start-ups, Indian edtech companies were on a hiring spree during the pandemic.
Edtech companies are pushing for efficiency
The funding winter and increasing losses have forced edtech companies to achieve efficiency with a smaller workforce. Laying off the excessive number of staffers they hired during the pandemic is part of the process. Edetch companies have cut down their marketing and discretionary expenses. They are also trying to pivot from loss-making segments to those that can add value.
Reopening of schools and tuition centers affected edtech companies
The pandemic forced schools and tuition centers to close down. Edtech companies saw this as an opportunity and took over the void left by schools and tuition centers. However, once the pandemic mellowed down, schools and tuition centers reopened. This is where things went wrong for several edtech companies. They did not imagine people abandoning them en masse, but that's what happened.
Edtech companies are leaning toward hybrid model
Edtech companies are now focusing on a hybrid model to deal with the drop in demand. In January this year, BYJU's announced that it would open at least 300 more tuition centers this year, bringing the total to over 600. Similarly, PhysicsWallah formed a joint venture with Utkarsh Classes last month. The goal is to create a robust hybrid model.
